VAT Changes in Poland since 1 July 2015

The Value Added Tax Act of 11 March 2014 ("VAT Act") changed at the beginning of July 2015. First, Article 12(1) of the act of 7 February 2014 amending the Value Added Tax Act and certain other acts was applicable until 30 June 2015 only. It dealt with the deductibility of VAT disclosed in invoices for fuel purchases in the so-called mixed use. Second, in order to adapt the VAT Act to the EU regulations and the judgements of the Court of Justice of the European Union 1 July 2015 brought into force the act of 9 April 2014 amending the Value Added Tax Act and the Public Procurement Act ("VAT Amending Act"). However, some of the changes have been postponed until 1 January 2016. These include the new rules of deductibility of input tax on purchases of goods and services which are used for business to a limited extent only, or the rules of calculating input tax on purchase or development of real properties used for business and other purposes, as well as the liquidation of the preferential rate of 8% on supplies of firefighting equipment.

On the following pages we are describing the changes effective from 1 July 2015 in more detail.

Deductibility of VAT on fuel in mixed use

Without doubt the most palpable change effective from 1 July 2015 is the right to deduct 50% of VAT disclosed in invoices for purchases of petrol, diesel oil and gas used in passenger cars and other vehicles with a total permissible weight not exceeding 3.5 tonnes and a specified carrying capacity.

Please note that the Ministry of Finance explained on its website that the right to deduct 50% of VAT applies exclusively to expenses for fuel purchased on or after 1 July 2015. Invoices issued until the end of June 2015 which you received in July or invoices issued in July to document fuel purchases made before 1 July 2015 will not entitle you to claim input VAT.

Taxpayers who have declared that they would use their cars exclusively for business purposes are still entitled to claim all of the input VAT on fuel purchases and other car expenses.

VAT accounting for bad debts

The changes introduced by the VAT Amending Act affect also the bad debt allowance available to creditors. Under the legislation valid until 30 June 2015 this incentive was not available if a creditor and a debtor were connected in a way described in Article 32(2)–(4) of the VAT Act, i.e. there were family, capital, asset or employment links between them. Beginning on 1 July 2015 such links will no longer disqualify creditors from using the bad debt allowance.

At the same time, the situation of debtors undergoing bankruptcy proceedings or liquidation changed significantly. Previously, pursuant to Article 89b(1) of the VAT Act, they were obliged to adjust invoices not paid within 150 days after their due date. Now, by virtue of the newly added paragraph 1b, they no longer have to adjust the deducted VAT amount if they are in bankruptcy or liquidation as of the last day of the accounting period in which the 150th day after the payment due date for the goods and services elapsed.

Moreover, the lawmakers have made these taxpayer-friendly regulations retroactive. Therefore, you may apply both changes to debts which arose before 1 July 2015 and were proven, in line with Article 89a(1a) of the VAT Act, to be unrecoverable after 31 December 2012, that is, which had a due date of 4 August 2012 or earlier.

Article 99(7)(3) of the VAT Act also changed on 1 July 2015 and now taxpayers who are exempt from filing VAT returns on a regular basis do have to file adjusted VAT returns whenever they become obliged to adjust the input tax amount. They were not obliged to do so until 30 June 2015.

Joint and several liability for sales of sensitive goods

Another important change affected the list of sensitive goods meaning that supplies of those goods disqualify a taxpayer from the opportunity to file VAT returns quarterly pursuant to Article 99(3a)-(3c) of the VAT Act. If the goods are considered sensitive, buyers may be held liable for tax arrears jointly and severally with suppliers – under Articles 105a-105c of the VAT Act.

The list of the sensitive goods is made Appendix no. 13 to the VAT Act. So far it included 12 groups of goods and the number grew to 21 on 1 July 2015. The newly-added goods in Appendix no. 13 to the VAT Act include e.g. silver and platinum in the form of raw materials or semi-products as well digital cameras and digital camcorders.

New amounts of "security deposits"

A recipient of sensitive goods may be liable for tax arrears jointly and severally with the supplier in the part proportional to the supply to that taxpayer. However, he may avoid such liability if he buys the goods from a supplier who is, on the date of supply, on a special list of the Minister of Finance kept in a digital form and published in his Public Information Bulletin. Suppliers who want to be on that list must pay a security deposit of a certain amount. According to the old regulations, the deposit could not be less than PLN 200,000 and more than PLN 3,000,000, regardless of the goods supplied. Starting on 1 July 2015 the minimum deposit for suppliers of fuel, heating oil and lubricating oil went up to PLN 1,000,000 and the maximum deposit is now PLN 10,000,000. With respect to the other goods listed in Appendix no. 13 to the VAT Act old regulations remain in force.

If a supplier of fuel, heating or lubricating oil paid the security deposit before 1 July 2015 in the amount required under the old regulations, he can top it up until the end of September 2015. Joint and several liability against buyers of goods from such a supplier is excluded in the period from 1 July to 30 September 2015, even despite the lack of the security deposit in the proper amount. If a supplier fails to top up the security deposit, he will be removed from the list of the Minister of Finance automatically at the end of September 2015.

Furthermore, deposits paid in cash, whether before or after 1 July 2015, will bear interest equal to 30% of the deposit rate calculated according to the rules of the National Bank of Poland.

Goods subject to the reverse charge procedure

Starting in July, only entities registered as active VAT taxpayers are obliged to account for VAT through the reverse charge. As a consequence, supplies of goods to exempt VAT taxpayers and unregistered taxpayers should be invoiced using standard VAT invoices with input VAT at the applicable rate. Supplies to active VAT taxpayers should continue to be invoiced without information about the tax rate and tax amount but with a "reverse charge" note.

Thirteen new items were added on 1 July 2015 to appendix no. 11 to the VAT Act which used to include 41 groups of goods subject to the reverse charge mechanism. They include:

non-alloyed rib sheets;

unwrought gold or gold in the form of semi-finished product or powder – exclusively gold with fineness of 325 parts per mille or more, excluding investment gold in the meaning of Article 121 of the VAT Act, subject to item 22b;

investment gold in the meaning of Article 121 of the VAT Act;

silver-plated non-noble metals, and platinum-plated non-noble metals, silver or gold, processed not further than to semi-finished product state – exclusively gold with fineness of 325 parts per mille or more, platinum-plated, processed not further than to semi-finished product state;

unwrought aluminium;

unwrought lead;

unwrought zinc;

unwrought tin;

unwrought nickel;

jewellery and its parts and other jewellery products and their parts, made of gold and silver or noble metal-plated – exclusively parts of jewellery and parts of other jewellery products made of gold with fineness of 325 parts per mille or more, i.e. unfinished or incomplete jewellery products and evident parts of jewellery, including those covered or plated by a noble metal;

phones for cellular or other wireless networks – exclusively mobile phones, including smartphones;

videogame consoles (used with a TV set as well as with a built-in screen ) and other arcade or gambling machines with an electronic screen – excluding parts and accessories.

As regards the last three groups, the reverse charge mechanism kicks in if the total value net of VAT of those goods in a uniform economic transaction exceeds PLN 20,000. A uniform economic transaction may consist of more than one supply or more than one contract. It will be assessed taking into account all the circumstances in a certain situation.

At the same time, understating the value of a supply in a uniform economic transaction by reducing the price or granting a discount to the buyer does not change which taxpayer is obliged to account for the VAT on the supply of the goods in that uniform economic transaction.

Recapitulative statements in domestic trade

Starting in July, a new type of recapitulative statements, namely recapitulative statements on domestic sales, was introduced for domestic transactions subject to the reverse charge procedure. Such statements must be filed by suppliers of goods or services where the taxable person is the buyer. The statements must be filed monthly or quarterly depending on whether the supplier of the goods or services file monthly VAT-7 returns or quarterly VAT-7K/VAT-7D returns.

We will be glad to assist you in this regard and provide you with CIT, PIT, VAT advisory services in Poland. Our tax advisers in Cracow, Gdansk, Gliwice, Poznan, Warsaw and Wroclaw will also answer any other tax-related questions that you may have. We take this opportunity to encourage you to contact us.

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